8 September 2023
Multi-Asset Monthly Comment - October 2023
RAM Global Multi-Asset
In October, risk assets experienced a sell-off, with most asset classes exhibiting a negative performance. The decline in market sentiment was mainly linked to surging long-term interest rates, mixed corporate earnings results and geopolitical tensions, which added to volatility of energy prices. Macroeconomic figures showed that the U.S. economy continued to perform well, with record GDP growth, a robust job market, and PMIs in expansion. In contrast, economic momentum in Europe weakened further. Despite increased economic and geopolitical uncertainties, the VIX Index peaked at 22, but closed the month below its long-term average level of 20, still pricing a low risk environment. Most asset classes, except for gold, performed negatively in October. Global equities underperformed, down approximately 10% from the July highs. Long-end interest rates extended their decline due to strong debt issuance and weak demand. Short-end rates stabilised following hints of a pause by the Federal Reserve. The classical 60:40 multi-asset portfolio was significantly affected due to the strong positive correlation in place between equities and bonds.
The Diversified Equity book represented the bulk of the negative contribution, with the main losses stemming from the US and EU market. Mid & Small Cap exposures also weighed on performance in this category. In Single Name equities, China Tech names and semiconductor exposures detracted underperformed. DM government bonds (USD, EUR and GBP) and diversified IG exposures were detracted from performance due to the upside move in interest rates over the month. Risk Reducing strategies, expressed through equity put options and index volatility trades, made a positive contribution. However, these gains were not enough to compensate for the losses elsewhere as the disconnect between implied volatility and realised volatility as well as broad market sentiment was striking once again. Equity Market Neutral strategies drove returns in the Liquid Alternative sleeve thanks to strong gains registered in the short book.
RAM (Lux) Systematic Funds -Global Multi-Asset Fund is a Sub-Fund of RAM (Lux) Systematic Funds, a Luxembourg SICAV with registered office: 14, Boulevard Royal L-2449 Luxembourg, approved by the CSSF and constituting a UCITS (Directive 2009/65/EC).
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